Operating Agreement LLC Virginia

A Virginia Limited Liability Company (LLC) Operating Agreement is an internal document that outlines how the LLC will be governed. It describes the company’s ownership structure, management responsibilities, and operational rules. Some refer to it as a Virginia Operating Agreement or Virginia LLC Company Agreement. Regardless of the term used, it serves as the primary internal governance record for the LLC.

Many LLCs create an Operating Agreement during formation, while others adopt one later as the company evolves. The document is not filed with the state and remains part of the company’s internal records.

Is a Virginia Operating Agreement Required?

Virginia does not legally require LLCs to adopt an Operating Agreement. Under the Virginia Limited Liability Company Act, an Operating Agreement may be written or oral. Although not mandatory, preparing a written agreement is strongly recommended. Without one, the LLC automatically defaults to the statutory provisions of Virginia Code Title 13.1. These statutory rules may not reflect how members wish to operate the business.

Why a Virginia Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps demonstrate that the LLC exists as a separate legal entity. Courts may evaluate internal governance when determining whether to uphold limited liability protections. For single member LLCs, a written agreement offers essential documentation showing that the business and its owner operate independently.

Establishes internal rules and expectations

Virginia’s default legal provisions apply only when an Operating Agreement does not address a specific issue. A customized agreement allows members to define operational procedures, decision making rules, and financial arrangements, helping prevent disputes and confusion.

Required by financial institutions and third parties

Banks, lenders, and accountants frequently request an Operating Agreement before opening accounts or authorizing financing. The agreement confirms ownership details, identifies who may act on behalf of the LLC, and provides documentation showing how the business is structured internally.

Key Provisions to Include

A Virginia Operating Agreement typically includes the following:

Basic Company Details

• LLC name
• Business purpose
• Principal office
• Duration
• Federal tax classification. Virginia requires LLC names to include Limited Liability Company, LLC, or a permitted abbreviation.

Registered Agent and Office

• Identifies the Virginia registered agent responsible for receiving legal notices
• Any change must be filed with the Virginia State Corporation Commission

Member Information

• Names and addresses of all members
• Ownership percentages
• Initial contributions

Capital Contributions

• Cash, property, or services contributed by each member
• Clarification that members are not automatically entitled to interest on contributions

Management Structure

• Whether the LLC is member managed or manager managed
• Description of the authority and responsibilities associated with the chosen structure

Profit and Loss Allocation

• How profits and losses will be allocated
• How and when distributions will be made
• Confirmation that distributions may be made only if the LLC can meet its obligations

Tax Election

• Federal tax classification selected by the LLC
• Note that certain elections require additional IRS filings

Voting Procedures

• Voting rights
• Quorum requirements
• Decision making thresholds: Many Virginia LLCs base voting on ownership percentages unless stated otherwise.

Transfers of Interest

• Procedures for adding or removing members
• Rules for transfers due to withdrawal, death, or expulsion
• Buyout procedures

Records and Bookkeeping

• Method for maintaining financial statements, meeting notes, and tax filings
• Requirement to pay the Virginia Annual Registration Fee to remain in good standing

Compensation

• How members, managers, or officers will be compensated if compensation is provided

Dissolution

• Events that may trigger dissolution
• Steps for winding up operations
• Filing Articles of Cancellation with the Virginia State Corporation Commission

Amendments

• How the Operating Agreement may be amended: Most Virginia LLCs require written member approval for changes.

Management Options for Virginia LLCs

Member Managed

In a member managed LLC, members oversee daily operations, make management decisions, and may bind the company through their actions. This structure is common for small businesses where owners actively participate. Voting rights typically follow ownership percentages unless the agreement specifies a different method.

Manager Managed

In a manager managed LLC, members appoint one or more managers to handle daily operations. Managers may be members or nonmembers. Members retain control over major decisions but do not manage day-to-day activities unless given specific authority.

Creating and Maintaining the Virginia Operating Agreement

Drafting and Signing

An Operating Agreement becomes effective when adopted by the members. While Virginia allows written or oral agreements, a written document provides clarity and legal certainty. The agreement is not filed with the State Corporation Commission.

Recordkeeping

The Operating Agreement should be kept with the LLC’s permanent records at its principal office. Members should retain copies for personal reference. Virginia requires LLCs to pay an Annual Registration Fee, making accurate internal documentation important.

Amending the Agreement

If changes are needed, members should prepare the updated version, review it collectively, and sign it according to the amendment procedure outlined in the agreement. If the amendment affects information on file with the SCC, such as the registered agent or principal office, the LLC must submit the appropriate update.